Political and security instability fears top Israeli investor concerns, survey finds
Poll shows fundraising remains a major worry, while the M&A market for Israeli startups sets a new high with $10.5 billion in deals led by foreign acquirers over the past year
Sharon Wrobel is a tech reporter for The Times of Israel.
Political and security instability alongside the ability to raise funds are the leading concerns for Israeli investors and entrepreneurs, as the war with the Hamas terror group is in its 14th month with no end in sight, according to a new survey.
Asked in the survey about what biggest challenge investors face in Israel today, 43 percent responded political and security uncertainty and 38% cited difficulties in fundraising for new venture capital initiatives to invest in the local tech ecosystem. The survey presented at the annual “2024-2025 Trends and Forecasts” confab in Tel Aviv on Thursday was conducted among a sample of 200 VCs, angel investors, and entrepreneurs.
At the annual event organized by tech accelerator Fusion and law firm Pearl Cohen Zedek Latzer Baratz, which was attended by investors, VC funds, and tech executives, the message was that despite the industry’s resilience over the past year, there are concerns not only about the future of the local tech scene but also about the future of Israel because of the war and the security situation and attempts to revive the contentious judicial overhaul.
Speaking at a discussion panel, Gigi Levy-Weiss, a general partner at NFX and a senior figure in last year’s High Tech Protest against the overhaul, said that there was a “silent departure of tech entrepreneurs,” leaving the country because of frustration with the current government.
Israeli venture capital-backed startups secured $8.1 billion in funding in the first nine months of the year, as they continued to run their businesses even as they sheltered from rockets, and many of their executives and employees were called up to reserve duty, following the outbreak of war on October 7, 2023, when thousands of terrorists burst into southern Israel from the Gaza Strip, killing some 1,200 people and abducting 251. That amount compares with $9.2 billion in 2023.
Fundraising by Israeli tech startups plunged 56% in 2023, as the sector grappled with political uncertainty around a judicial overhaul proposed at the start of last year by Prime Minister Benjamin Netanyahu’s right-wing government fueling investor concerns over a weakening of Israel’s democratic checks and balances.
“The past year was a good year as there was only a slight decrease in fundraising levels from last year and amidst a war and global uncertainty that is a pretty good outcome for the Israeli tech scene,” Fusion co-founder Guy Katsovich told The Times of Israel on the sidelines of the confab. “But when you ask investors and entrepreneurs about their predictions most of them are worried because of the war and political instability as well as the uniqueness of Israel’s excellence in cybersecurity.”
Katsovich elaborated that the Israeli tech ecosystem was “overly concentrated in cybersecurity, with too few resources directed toward consumer-focused companies.”
“This limits the potential for Israel to build large-scale consumer businesses,” he added. “Without a shift in investment trends, the market will remain heavily skewed toward cybersecurity startups.”
Founded in 2017 by Katsovich and Yair Vardi, Fusion has invested in over 130 early-stage startups and manages $30 million in assets.
Another concern raised in the survey was the question of how Israel can maintain its status not only as a startup nation at the forefront of cybersecurity but also of developing artificial intelligence and software technologies. When asked about the sectors leading venture capital investments in 2025, the respondents in the survey picked AI, cybersecurity, and fintech.
“Israel is known for its quality human capital coming out of special army tech units that are trained in a field with a commercial application mainly cybersecurity,” said Katsovich. “But we don’t have that same infrastructure for artificial intelligence.”
Data presented by Asaf Horesh, managing partner at Vintage Investment Partners, showed that despite the war the value of Israeli tech exits or mergers and acquisition deals hit a record $10.5 billion over the past year surpassing $8.6 billion, the last record registered in 2021.
“This is quite outstanding as M&A deals are still not picking up in markets in the US and Europe,” said Horesh.
Behind the lion’s share, or 78% of the value of acquisition deals of Israeli startups over the past 12 months were foreign, mainly US buyers, the data showed.
Earlier this year, Nvidia spent almost $1 billion to buy two Israeli startups. The US chipmaker bought Israeli AI startup Deci for about $300 million and local startup Run:ai, for about $700 million. The acquisition of Run:ai is Nvidia’s biggest acquisition in Israel since it bought Mellanox Technologies Ltd. in 2020 for $6.9 billion.
San Francisco-based software giant Saleforce also scored two big deals in Israel with the acquisition of Own, an Israeli data backup startup for $1.9 billion and local data management startup Zoomin for $450 million.
Other notable mega deals that happened this year are German business software maker SAP buying Israel’s WalkMe Ltd. for $1.5 billion, Blackstone acquiring Priority Software for $800 million, and Johnson & Johnson buying V-Wave.
